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HMRC internal manual

VAT Charities

Business and non-business: Charitable activities: Treatment of welfare services supplied below cost: What if a charity wants its welfare services to be business activity?

Non-business reliefs can be a double-edged sword. Whilst they allow supplies to be made without VAT being charged, they also restrict the entitlement to input tax recovery of the charity making those supplies. Occasionally a charity might wish it’s “below cost” welfare supplies to distressed persons to be regarded as a business activity.

For a policy to be workable it has to be capable of being applied generally and consistently. We would argue that:

  • The non-business relief is designed to benefit charities overall and, indeed, achieves this effect.
  • Applying the relief consistently keeps the system as simple as possible.

However a concession cannot be forced on a charity that does not want it. If a charity insists on rejecting the concession you should allow business treatment. Once a charity insists on rejecting the concession we would not normally allow the charity to opt in subsequently. Whether a charity that wishes to reject the concession or to use it, they must do so for all their welfare supplies and for the whole organisation, rather than picking and choosing where the concession suits them.